General Mills, Inc. v. Franchise Tax Board

*1294 Opinion

Under California’s version of the Uniform Division of Income for Tax Purposes Act (UDITPA; Rev. & Tax. Code, § 25120 et seq.), 1 the portion of a national or multinational company’s income that is subject to taxation in this state is determined by a formula that compares the company’s payroll, property and sales in this state to its total payroll, property and sales. When the standard formula does not fairly represent the extent of the company’s business in California, however, UDITPA also provides for application of a reasonable alternate formula in order to achieve an equitable result. (§ 25137; Microsoft Corp. v. Franchise Tax Bd. (2006) 39 Cal.4th 750, 757 [ 47 Cal.Rptr.3d 216 , 139 P.3d 1169 ] (Microsoft).)

General Mills, Inc., and its subsidiary corporations (hereafter, General Mills) is a unitary group of corporations operating both within and outside California. It is a consumer foods company with its principal place of business in Minneapolis, Minnesota. In opposing this tax refund action, the Franchise Tax Board seeks to apply an alternative formula to income resulting from trading by General Mills in agricultural commodity futures. General Mills engages…